The Financial Action Task Force (FATF), the global watchdog on terror financing, has for the first time flagged the issue of state support for terrorist financing in an official report marking a significant shift in the global counter-terrorism discourse and reinforcing India's long-standing position that Pakistan-backed groups fund and orchestrate attacks against it. The report, titled Comprehensive Update on Terrorist Financing Risks and released this week, draws on contributions from over 50 jurisdictions. It includes case studies from India, such as the 2019 Pulwama bombing and the 2022 Gorakhnath Temple attack, to highlight how terrorist organisations exploit the global financial system using informal hawala networks, cryptocurrencies and online marketplaces.
India's 2022 warning now globally recognised
India had in its 2022 national risk assessment officially identified Pakistan's state-sponsored terrorist financing as a major threat. The FATF's latest findings now echo that position, noting that certain groups continue to receive "financial and other forms of support from national governments". Senior Indian officials said the report strengthens New Delhi's demand to bring Islamabad back on the FATF's grey list from which it was removed in October 2022. "The report gives global legitimacy to what India has consistently flagged that terror groups like JeM and LeT are not rogue elements but tools of Pakistan’s state policy."
Pulwama, Gorakhnath attacks cited as digital jihad models
In a direct reference to the Pulwama suicide bombing where 40 CRPF personnel were killed, the FATF notes that a critical component of the IED aluminium powder was procured via an e-commerce platform identified in the report as Amazon. The attack was linked to Jaish-e-Mohammed, a UN-designated terror outfit based in Pakistan.
In another India-linked case study, the FATF details how the accused in the April 2022 Gorakhnath Temple attack transferred INR 6,69,841 (approx. USD 7,700) via PayPal to foreign accounts while using VPNs to conceal his digital footprint. Influenced by Islamic State ideology, the individual also reportedly received INR 10,323 from overseas, indicating a two-way financial trail. According to the FATF report, the payment service provider suspended the account due to the suspicious nature of the transactions.
Hawala, shell companies, social media used by LeT, JeM
The report delves into the operational funding routes of Lashkar-e-Taiba (LeT) and Jaish-e-Mohammed (JeM), which continue to exploit both traditional channels like hawala and cash couriers and digital platforms including social media, shell companies and crypto wallets.
Key points flagged:
- Hawala and unregulated remittance services dominate cross-border funding.
- Charities and front NGOs act as collection fronts, often with Gulf-based donors.
- Online donations via crowdfunding and P2P platforms fuel decentralised cells.
- Shell firms used to launder profits from natural resource trafficking and extortion.
- Terror outfits have turned to gold and jewellery as fund storage options in India.
Decentralised cells, radical youth on fintech radar
The FATF warns of a marked shift in global terror patterns from centrally led networks to decentralised, self-financing cells, often made up of younger individuals radicalised online.
Fintech tools, P2P payments and gaming platforms are now being used to raise small-value funds which are harder to detect but effective in supporting low-cost, high-impact attacks.
The report notes that platforms offering anonymity, pseudonyms, and no KYC compliance have weakened traditional oversight frameworks, making law enforcement's task more complex.
Pahalgam attack, Operation Sindoor cited as postscript
The report also references the April 2025 terror strike in Pahalgam, Jammu and Kashmir, which killed 26 people. While not attributing responsibility, the FATF said such high-impact attacks are not possible without organised financial infrastructure.
Following the Pahalgam incident, Indian forces launched Operation Sindoor, eliminating around 100 terrorists and striking at least nine terror hubs in Pakistan-occupied Kashmir. Among those neutralised were individuals linked to both the 1999 IC-814 hijacking and the Pulwama plot.
UN support and next steps
The report is clear: without state protection, groups like LeT, JeM and TTP could not operate on this scale. The report was co-led by France and the United Nations' Counter-Terrorism Executive Directorate (UN CTED). Natalia Gherman, Assistant Secretary-General at UN CTED, said the findings "represent an important step in identifying and addressing state-enabled terror networks". The FATF will hold a global stakeholder webinar on July 22 to discuss the findings with governments, banks, fintech platforms and regulatory bodies.
